Brower v. Gateway 2000, Inc.

Supreme Court of New York, Appellate Division, 1998.

246 A.D.2d 246, 676 N.Y.S.2d 569.

Dawson, pp. 701-706

 

Facts: The plaintiff bought a PC from Gateway through direct sales.  The PC box contained a “shrinkwrap agreement” which included an arbitration clause.  The plaintiff sued, claiming breach of warranty among other things because they didn’t get the service and support they were promised.  Gateway moved to dismiss the suit based on the arbitration clause.  The plaintiffs countered that the arbitration clause was unconscionable, in particular given the nature of the organization (the International Chamber of Commerce) that was to provide the rules.  The ICC was based in France, and its costs of arbitration were prohibitively high.  The trial court found for Gateway, and the plaintiffs appealed.

 

Issue: Is the designation of the ICC as the arbitration body unconscionable?

 

Rule: UCC § 2-302 allows courts to flexibly police against clauses that they find unconscionable as a matter of law.  Unconscionability consists of a combination of grossly unequal bargaining power plus terms that are unreasonably favorable to the more powerful party.

 

Analysis: The court finds that most of the plaintiff’s claims about the arbitration clause don’t hold water, but the court does find that the particular arbitrator chosen was not fair and was designed to deter individual customers from using the arbitration process.

 

Conclusion: The case is remanded to substitute a different arbitrator. 

 

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